Is this the end of Canada’s employment insurance system as we know it?

The federal employment insurance system has long been the source of income support to Canadians temporarily and unexpectedly out of work.

But in the midst of the unprecedented economic crisis that’s come alongside COVID-19, it faulted. And it’s since been replaced, temporarily, with something else.

Like a storm surge above a levy, the flood of more than two million EI benefit applications in mid-March quickly overwhelmed the federal government’s processing system — which was not equipped to handle so many claims at once.

And facing a unique crisis, in which the need for speed and simplicity would decide the financial fate of millions of Canadians, federal policymakers quickly realized a new backstop would have to be created. What resulted is the Canada Emergency Response Benefit (CERB).

While a hasty, imperfect creation, the CERB effectively relieved a key thread of the social security net that had proven insufficiently modern to assist the throngs of workers suddenly out of a job.

“COVID-19 has, as somebody put it, shone an X-ray and exposed, in many ways, problems that others have been trying to raise for some time,” said Laurell Ritchie, co-chair of the EI working group at the Good Jobs for All Coalition.

“It’s not as if these problems are new problems.”

While the EI system’s infrastructure wasn’t originally designed to handle mass layoffs, let alone on the scale witnessed in recent weeks, experts and advocates say longstanding issues with EI access were exposed during the pandemic — issues they believe call for a reckoning over the system’s future.

Among Ritchie’s concerns with EI is the stringent set of upfront rules and requirements, which she says make it hard for many Canadians to ever access support. At the start of the pandemic, applicants faced slow service and application difficulties, often waiting hours on the phone to clear up uncertainties on their forms.

Ritchie said one example of how complex the system has become can be found in the disqualification of workers who have been fired or who quit their job. Some workers have recently quit work due to coronavirus-related fears, she said — but federal income support rules would dictate that they are ineligible.

Unlike EI, the $2,000-a-month CERB provides the benefit first, with so-called “integrity checks” coming later at tax time. Canadians were able to finish applying for the CERB online within minutes, securing a financial lifeline with little burden.

Richie doesn’t believe that feature can be maintained in the long run — but expressed optimism about the message it conveyed. “It does show that it is possible to minimize the administrative complications at the front end in order to get benefits to people,” she said.

Another issue that has emerged with EI is its failure to reflect the rise of gig workers and the self-employed — as well as overlapping part-time work involving multiple employers.

“The pandemic has demonstrated that many of our longstanding social supports like EI tend to assume that people are engaged in traditional employment relationships,” said Sunil Johal, a fellow at the Brookfield Institute and Public Policy Forum. “So, permanent, full-time positions with the same employer.”

A 2019 study co-authored by Johal noted that the number of multiple job-holders across Canada had increased by 168 per cent since 1976. Part-time workers increased by 49 per cent, and self-employed workers by 26 per cent. EI eligibility requires workers to contribute into the program through premiums, leaving many self-employed workers excluded.

With these trends expected to continue, the study argued that EI would continue to leave too many behind without a modernization push that adapts the program to new realities and fixes longstanding issues.

Some of the Public Policy Forum’s other recommendations on revising the EI formula had been called for in a C.D. Howe Institute report published a decade earlier. The 2009 report was critical of the eligibility requirements and benefit durations under EI, which vary regionally according to the unemployment rate in 58 different regions in Canada. Minimum work hour requirements vary between 420 to 700, with workers in areas with higher unemployment needing fewer hours in order to be eligible.

Unemployment was generally a poor indicator of economic conditions, the study argued, and the regional formula was presented as prolonging the persistence of unemployment — particularly seasonally — while leaving EI access inequitable across much of the country. The authors recommended the creation of uniform, countrywide entrance requirements, which they proposed be centered around a 360-hour threshold.

“Now would probably be an ideal time to get on with it,” said C.D. Howe Institute economist Alexandre Laurin, who co-authored the study as Canada was crawling out of the global recession. He said the lag between regional job prospects and the unemployment rate is especially problematic in recessionary periods.

Johal’s study, meanwhile, noted that only around 30 per cent of unemployed Ontarians were collecting EI regular benefits in 2017, compared to nearly all of the unemployed populations in Atlantic provinces.

As recently as the 1990s, EI covered 80 per cent of Canada’s unemployed workers. Today, it is somewhere closer to 40 per cent, largely due to non-contributors forming a larger share of the unemployed population.

The CERB’s entrance requirements are closer to what the C.D. Howe authors were envisioning more than a decade ago — they’re uniform across the country, with access only requiring an income of at least $5,000 in the previous year and lost income due to the pandemic.

Johal believes that the evolution of the CERB shows a necessary adjustment to new realities. After its introduction, the program was opened up to those earning less than $1,000 a month and seasonal workers who would see their EI benefits run out — changes that Prime Minister Justin Trudeau said would accommodate self-employed and part-time workers, those part of a newer normal.

“What we’re seeing is policymaking on the fly, where the CERB and other programs are being developed initially based on that traditional employment relationship premise, and then having to be modified very quickly,” Johal said. And he argued that those reforms for EI, among others, are long overdue.

“I think the pandemic will cause that to happen much more quickly,” he said.

So, how far should Canada go to overhaul the system? For Mel Cappe, the former chairman of the Canada Employment Insurance Commission — which is the division of Employment and Social Development Canada that oversees the EI system — it’s time to think big, with a move toward a universal income benefit.

“I’m an incrementalist. This is not the time to be incremental,” he said.

Cappe, who also served as Clerk of the Privy Council from 1999 to 2002, said universal basic income with streamlined rules could provide more equal treatment across the wide variety of socio-economic situations that workers face across Canada — effectively, he argued, patching up holes in the income safety net.

He also argued that it would make social security simpler, by integrating the variety of transfer payments to individuals. Payments could be clawed back for those better off, while working with other levels of government on a smaller marginal effective tax rate at lower incomes to encourage people to find work.

To get there, Cappe advocated for testing of basic income through pilot projects — like the one that ran during the Ontario Wynne government — alongside reforms to the EI system. Benefits could then be integrated over the course of a decade to get to a universal benefit system, he explained.

Changes to EI in the immediate future — such as expanding coverage for self-employed workers, improving training initiatives, cutting wait times and upgrading its archaic technology system — are ways to help lay the groundwork for a move toward a new benefit, he said.

“It’s improving EI on the way to a new benefit, which is going to be much broader and much more general,” he said.

Ritchie was more cautious about the idea of universal income benefit, saying it could tilt the balance between workers and employers paying for an income security program that could result in higher taxes for ordinary Canadians. The EI program, like other insurance programs, are financed annually through employers and worker premiums.

Efforts are still needed to reform EI, in her view — to increase access, reduce hours requirements and guarantee better support for low-income workers. However, Ritchie said she believes now there’s an appetite from the public, and specifically among Canadians who’ve lost their jobs, to see “big reforms.”

“That’s going to mean a lot of mobilizing on the part of different organisations to bring that pressure to bear,” she said.

Employment Minister Carla Qualtrough was not available for an interview this week, but spokesperson Marielle Hossack said in a statement that “while we are squarely focused on the current needs of Canadians today, there will be many lessons learned that will inform how we move forward in supporting Canadian workers and their families through difficult times.”

Qualtrough had told the House of Commons human resources committee last Friday that the EI system “does not cover all of the situations workers are facing in this public health crisis.”

David Macdonald, senior economist at the Canadian Centre for Policy Alternatives, said Canadians familiar with the relative advantages of the CERB — namely its generosity and simplicity — won’t like a return to the traditional program.

A recent analysis conducted by Macdonald found that nearing half of the 1.2 million unemployed workers entering the pandemic period were not receiving EI benefits. The 16-week benefit duration for the CERB, meanwhile, is set to expire for roughly seven million initial claimants in June.

“I don’t think Canadians will accept going back to the old system,” Macdonald said. “I think that the CERB is creating the foundation for a new employment insurance system.”